What is Cloud Accounting?
Although the majority of the medium to large enterprises are still using traditional accounting software and packages, hosted locally; there are a whole lot of small and medium businesses that are turning to SaaS Accounting Software, usually hosted on “the cloud.”
What is “the cloud” that everybody is engrossed in nowadays! to put it up simply, in a layman’s language, the cloud is that platform that allows hosting a database, software or any form of technological service “in the air” just like a cloud. Cloud is a storage area hosted in a remote location and usually accessed through the web. The surge in data use that has accompanied this transition into the digital age has made the storage of vital information and data extremely challenging. That is why the cloud services from some of the world’s biggest companies like Amazon, Google, Microsoft, IBM, etc. play a pivotal role to make things easier from the technological forefront.
SaaS (Software as a Service) is a subscription-based licensing application unlike those that use upfront one-time software licenses. As the world accelerates towards digitalization, more and more businesses, small and medium, are switching into SaaS accounting packages leaving behind the traditional desktop-based expensive software. Entrepreneurs and CFOs today are more inclined towards the adoption of an Opex model rather than the Capex model when they come to investment decisions related to the said information systems.
Now without deviating from the topic at hand, let us get into the know-how behind cloud services and how it can be used for accounting. The process of hosting files and databases in the cloud is quite simple. Mostly, cloud accounting uses SaaS accounting software.
Cloud accounting vs Traditional accounting
So, what’s all the fuss about “cloud accounting”? How the companies are getting benefits by moving to cloud services? How is it different from traditional accounting?
1. Accessibility and flexibility
Using cloud accounting one can access data and get accounting work done when and wherever someone likes as long as there is an active internet connection. This means the user is not at risk of losing his financial data in spite of losing his device or doesn’t have a business continuity plan in place.
2. Cost and time effectiveness
With traditional accounting, business needs to invest in IT hardware along with its maintenance also. There is an additional cost of a server for the application of software and financial data. Companies need to bear the regular operating cost because servers and networks need to be maintained by specialized human resources. On the contrary, cloud accounting runs on remote servers where users access their financial data through a web-based interface or at times, from a desktop client. It simply requires buying a subscription and is ready to be used. Cloud accounting saves the cost and keeps various functions connected to the business thereby making access to financial processes and data smooth.
On the flip side, cloud accounting needs continuous connectivity to the internet and businesses to consider a factor of the possibility of disruptions in internet connectivity which is not considered to be a doom’s day scenario yet and which still very common in many parts of the planet.
3. Security & Backups
No doubt, Cloud accounting is the future, but compared to traditional accounting, there is always a concern of security as data is stored at remote locations and accessible over the internet. Companies that provide these cloud-based accounting packages provide multiple layers of protection. These companies claim to provide bank & military level security with the latest encryption techniques and strictly monitoring servers. So, if a business is concerned about the security of data hosted on these clouds, they should probably be more concerned about their electronic banking since both use the same protocols.
4. Updates and Backups
With SaaS, Cloud accounting eliminates the trouble of updates and backups, as cloud-based accounts are always backed up. This allows cloud-based users to work with the very latest versions of their software. This software provides real-time updated functions, foreign currency rates, regional tax rates and necessary bank feeds.
5. Go Paperless
The maintenance and regular updating of official paperwork, accounting documents, is a daunting task indeed. The tedious effort of maintaining receipts, invoices, payments and other supporting documents stresses the need for cloud accounting. Having a business on the cloud does not restrict access to your accounts to a single physical instrument. So long as a computer or any other device with similar functionality is available at hand, a businessman can access data online, without worry.
With cloud software like Xero or QBO, a transition from paperwork to digital data can be made with ease and with very little cost involved. Accounting processes can thus be automated, reducing manual errors whilst eliminating the need for safekeeping of confidential data in the physical form, which is also a blessing for small and medium businesses where resources are limited.
6. Easy Integration
The accounts department need no longer be restricted to itself. The Cloud allows different applications existing for multiple areas – sales, marketing, HR, accounts, inventory – and many others to work together flawlessly.
Cloud accounting software is compatible with most software located in the Cloud and as is the case with most businesses, there is a comprehensive library of various applications that integrate with its accounting application seamlessly.
For instance, if a business needs to incorporate a payroll or customer management system with an accounting system, it can easily integrate the systems by seeking out an appropriate application from the app market.
7. Work Across the Globe
With the cloud system, having a scattered workforce will not be a complicated and stressful problem. Any of the employees having access to the cloud accounting system can access the data at any time. The business is unaffected by place or time.
With Cloud Accounting, there is also an added advantage of the accountant not having to visit the office or waiting for office hours to update the numbers. With the cloud at hand, updating data is a simple matter of accessing the internet.
Is the cloud secure?
Just how safe is it to post someone’s personal financial data online? Well as long as the necessary precautions are taken, the web is still the best way to save business tools. The cloud is a collection of servers in a remote location. There are different cloud companies, and each runs its own safe service. Basically it means that there is a difference in their shows that how they use. Some are designed to hold large amounts of information, some to quickly crunch numbers and others offer security in multiple flavours. Different cloud providers have their own procedures and standards for safety. Intuit Quickbooks or Xero, for example, are two popular software that has a level of security which is at par with that used in online banking to ensure that the financial data is safe. To embark on the journey of moving to cloud accounting, some of the things to look out for a SaaS accounting package are:
● Encryption – While transmitting data to the cloud, or even while it is set in the cloud, strong encryption is used to make sure the data is safe. When the data is encrypted, it’s transposed into a very special code which won’t make any sense to anyone trying to tamper with it. A great example is the Secure Socket Layer (SSL). It’s said that using a 128-bit SSL encryption is best as it is next to impossible to break it. It would take the best of hackers thousands of years to break in. Most of the Banks use this encryption as well.
● Auto-backup and redundancy– This service is offered by most cloud providers. The advantage here is that your financial data is copied and stored in multiple systems or even geographical locations. This will drastically minimize the risk of data loss due to natural disasters, power outages etc.
Role of software for cloud accounting and its cost?
Cloud accounting software, nowadays, cost considerably lower than they did before. Making the best decisions on the best cloud-based accounting software for a business can be overwhelming because of its easy use and well-priced solutions output. The only decision that needs to be taken is whether to make an upfront huge capital outlay or to go for a subscription-based opex approach. Then figure out what software works best for you. Accordingly, the best possible option needs to be selected that syncs in with the business (small, medium or large-sized). Quickbooks one, Xero, SageOne, Plex or SAP One all are transforming the workflow of businesses around the world.
Cloud Software for an Efficient Business
How can Cloud Accounting help in more efficient business management?
Its Suffice to know that the benefits are great enough to have the migration of many businesses to the Cloud and this trend is catching on.
The Combination of easy access, cost-effectiveness and security together, the Cloud allows businesses to grow with ease.
Mobile Cloud Accounting
The beauty of Cloud Accounting lies in the fact that they are not restricted to bulky physical systems. The data on the Cloud can be accessed on smartphones too. Using Mobile Cloud Accounting gives the added advantage of having speed, accessibility and feature support.
- Smartphones allow connectivity at any place to the internet, based on the network provider’s coverage. A desktop restricts the Cloud to only the local Wi-Fi.
- Mobile Cloud Accounting allows the Cloud to be accessed from multiple tools, such as laptops, Smartphones, and tablets. This allows device variability to be applied to the data, such as GPS, microphone, barometer, and light sensors. This also makes tracking of data uploads and access to be tracked better.
- Mobile Accounting, however, does have a restriction with regards to processing limitations. The memory and processing power gets limited to the device underuse. However, for SMEs, it is still a blessing in disguise.
- Mobile Accounting will allow for longer battery life whereas, a Cloud does not require processes on a mobile device that is execution intensive for its processing.
- Allowing the data to be stored in the Cloud does away with a chance of data getting lost on the mobile device. This increases the reliability of the data backup stored.
- By monitoring the data on the mobile devices remotely, mobile accounting allows maintenance of the software on a central point, increasing its security.
- Ease of access to updated real-time financial information is the most important factor. Executives and Key stakeholders can get the required info either going to bed or wake up.
Delhaize America, an operator of several large grocery chains in the United States uses the Cloud for not only its accounting purposes but also for analyzing its data, enabling them to improve its sales and marketing tactics.
Pearson is a worldwide education provider, which has used Cloud Accounting to establish a global infrastructure to free its existing resources.
A lot of companies have already adopted the use of cloud accounting. They have recognized the huge advantages which it presents to transform their businesses. Cloud is the future, sooner or later all businesses shall adapt to it – why one should not move now when the costs are still low? This is the best opportunity to get a competitive advantage of being more efficient and better informed.
This post is not being updated after it has been published.
Maroof HS CPA Professional Corporation provides consultancy to businesses to automate their accounting and business processes, and what cloud accounting systems to be used. Get in touch with us today to discuss your particular needs.